Silicon Valley Bank: The Largest American Bank Failure Since 2008
By On Friday, March 10th, Silicon Valley Bank (SVB) became the largest American bank to fail since the collapse of Washington Mutual in 2008, at the height of the global financial crisis.[0] The FDIC intervened, shutting down the 40-year-old bank and putting it into receivership. This is the second-largest failure ever for a retail bank in the United States.[1]
SVB had long served as a key lender to tech startups and venture capitalists, but recently faced a sharp decline in deposits as clients burned through cash.[2] On Wednesday, SVB revealed a plan to raise billions of dollars to cover big losses it had incurred after selling $21 billion of its bond portfolio.[3] The announcement caused panic among investors, and SVB shares fell by over 60% on Thursday, and another 70% on Friday before trading was halted.[4]
The FDIC has said that insured depositors will have access to their funds by no later than Monday, March 13th, through a newly formed entity called the Deposit Insurance National Bank of Santa Clara.[5] Uninsured depositors will receive an “advance dividend” around the same time, and the FDIC will then start selling off SVB’s assets in an attempt to make its former clients whole.[6]
The collapse of SVB has raised uncomfortable questions about the future of the broader banking system. SVB was heavily dependent on the tech industry for both its depositors and its customers, and its concentrated bet proved to be bad news for many ambitious startups. Many analysts believe the implosion of SVB is company-specific at this time, but with the future of the banking industry in question, only time will tell.[7]
0. “How Silicon Valley Bank’s Failure Compares to Other Major Collapses” The New York Times, 11 Mar. 2023, https://www.nytimes.com/interactive/2023/03/10/business/bank-failures-silicon-valley-collapse.html
1. “Silicon Valley Bank failure could wipe out ‘a whole generation of startups'” NPR, 11 Mar. 2023, https://www.npr.org/2023/03/11/1162805718/silicon-valley-bank-failure-startups
2. “Why the SVB-Triggered Selloff Is a Buying Opportunity in Big Bank Stocks” Barron's, 10 Mar. 2023, https://www.barrons.com/articles/bank-stock-buy-svb-52ee8b9e
3. “Ackman calls on US government to consider Silicon Valley Bank bailout” Business Insider, 10 Mar. 2023, https://www.businessinsider.com/silicon-valley-bank-bill-ackman-billionaire-government-bailout-svb-2023-3
4. “Wall Street banks including JPMorgan, Bank of America see $55B value wipeout” Markets Insider, 10 Mar. 2023, https://markets.businessinsider.com/news/stocks/jpmorgan-bank-of-america-biggest-banks-market-cap-value-wipeout-2023-3
5. “Here's how much of your bank deposits are FDIC protected” The Washington Post, 11 Mar. 2023, https://www.washingtonpost.com/business/2023/03/10/faq-fdic-insurance
6. “How Silicon Valley Bank's Failure Is Creating Total Chaos” New York Magazine, 10 Mar. 2023, https://nymag.com/intelligencer/2023/03/how-silicon-valley-banks-failure-is-creating-total-chaos.html
7. “Silicon Valley Bank collapse has echoes of 2008. Here's why things are different this time” CNN, 10 Mar. 2023, https://www.cnn.com/2023/03/10/investing/svb-banking-crisis-what-next/index.html
